Iran is an energy superpower.[3] Iran is in a constant battle to use its energy resources more effectively in the face of subsidization and the need for technological advances in energy exploration and production. Energy wastage in Iran amounts to six or seven billion dollars (2008). The energy consumption in the country is extraordinarily higher than international standards. Iran recycles 28 percent of its used oil and gas whereas the figure for certain countries stands at 60 percent.[4] Iran paid $84 billion in subsidies for oil, gas and electricity in 2008.[5] Iran is one of the most energy-intensive countries of the world, with per capita energy consumption 15 times that of Japan and 10 times that of European Union. Also due to huge energy subsidies, Iran is one of the most energy inefficient countries of the world, with the energy intensity three times higher than global average and 2.5 times the middle eastern average.[6] Half of the country’s energy is wasted in domestic sector, 3.4 of which is wasted through the vehicles moving with single person and 2/3 parts of power plants' energy are also wasted.[7]

Iran is one of the leading members of OPEC (Organization of Petroleum Exporting Countries) and the Organization of Gas Exporting Countries (ch is well belGECF). Iran received $47 billion in oil export revenues, which accounts for about 50% of state revenues.[8] Natural gas and oil consumption both account for about half of Iran’s domestic energy consumption. With its heavy dependence on oil and gas revenues Iran continues to explore for new sources of natural gas and oil. Recently Iran has focused its energy sector on the exploration of the South Pars offshore natural gas fields in the Persian Gulf.[9]

Iran has become self-sufficient in designing, building and operating dams and power plants and it has won a good number of international bids in competition with foreign firms.[10][11]

Power generation capacity of Iranian thermal power plants reached 173 terawatt hours in 2007. Accounting for 17.9 percent of power production in the Middle East and African region. Natural gas has been the main energy in Iran in 2007, comprising over 55 percent of energy needs, while oil and hydroelectricity accounted for 42 and 2 percent respectively. The region’s energy need will increase by 26.8 percent until 2012.[12]

Energy plays an important role in Iranian politics. Robert Baer in his book The Devil We Know: Dealing with the New Iranian Superpower argues that Iran has attained the status of an energy superpower and is on its way to become a military-political superpower.[13]

Iran has the second largest oil reserves in the world, and the third largest exporter of it. According to 2006 estimates Iran produced about five percent of total global crude oil production. They produced 4.2 million barrels per day (670,000 m3/d) of total liquids and 3.8 million of those barrels were crude oil. Iran plans to invest $100 billion during the next four years in different sections of its oil industry (2009).[17] By the end of 2009, Iranian oil R/P ratio was 89.4 years which is the world's highest.[18] By 2009, Iran had 52 active rigs and 1,853 producing oil wells.[19]

Iran possesses abundant fuels from which to generate energy. Since 1913 Iran has been a major oil-exporting country. Oil industry output averaged 4 million barrels (640,000 m3) per day in 2005, compared with the peak output of 6 million barrels per day (950,000 m3/d) reached in 1974. Following the 1979 revolution, however, the government reduced daily oil production in accordance with an oil conservation policy. Further production declines occurred as result of damage to oil facilities during the war with Iraq. In the early 2000s, industry infrastructure was increasingly inefficient because of technological lags. Few exploratory wells were drilled in 2005. Iranian oil was nationalized in 1953 and thus is owned and operated by the National Iranian Oil Company (NIOC).

Iran held 10.3% of the world's total proven oil reserves and that figures out to be about 137.6 billion barrels (2.188×1010 m3) of oil reserves at the end of 2009.[18] Oil also is found in northern Iran and in the offshore waters of the Persian Gulf. Nevertheless, in 2005 Iran spent US$4 billion on gasoline imports, mainly because of contraband and inefficient domestic use that result from subsidies. Iran is one of the largest gasoline consumers in the world ranking second behind United States in consumption per car.[20]

There is a growing recognition that prices must rise faster to curb consumption and ease the burden on the public finances. Cheap energy has encouraged wasteful consumption in Iran, and a brisk business in smuggling petrol into Iraq, Turkey, Pakistan and Afghanistan. Demand has also been supported by rapid increases in car production in recent years. In the absence of imports, the car industry has developed strongly (albeit from a low base) with output reaching over 1m vehicles in fiscal year 2006/07 (March 21-March 20).[21]

Iran oil production, domestic consumption and exports

The growth in consumption of domestically produced oil has been modest, owing to refining constraints. By contrast, fuel imports rose to 180,000 barrels per day (29,000 m3/d) in January 2005 from 30,000 barrels per day (4,800 m3/d) in 2000, and petrol consumption is estimated to have been around 1,800,000 barrels per day (290,000 m3/d) in 2007 (before rationing), of which about one-third is imported. These imports are proving expensive, costing the government about US$4bn in the first nine months of 2007/08, according to parliamentary sources.[21] Nearly 40% of refined oil consumed by Iran is imported from India.[22]

Iran contains 27 onshore and 13 offshore oil-producing fields, largely concentrated in the southwestern Khuzestan region near the Iraqi border.[9] The Iranian government is heavily reliant on oil revenues and they have heavily subsidized the energy industries, which figures out to be about 12% of Iran’s GDP. However, domestic oil consumption has decreased due to the alternative use of natural gas. Economic growth from these resources is uncertain and stunted in Iran due to these subsidies and population growth. Iran has been unable to reach it full production levels due to a combination of sanctions and war plaguing the region. Iran’s oil fields have a natural decline rate at 8 percent for onshore wells and 10% for offshore fields. The Iranian recovery rate is currently approximately 27 percent, which is well below the world average. Iran needs structural improvements made to coincide with their enhanced oil recovery efforts.[9]

Iran has the world's largest reserves of natural gas (17.9% of the world's total); these are exploited primarily for domestic use.[23] It contains an estimated 1,187.3 trillion cubic feet (33,620 km3) (Tcf) in proven natural gas reserves.[24] In 2005 a large share of Iran’s natural gas reserves were believed to remain untapped. About 62% of these reserves are located in non-associated fields. Iranian production of natural gas is expected to increase over the next few years due to continuing discoveries in the North Pars and South Pars regions.[25]

Domestic consumption has matched production at 3.6×10^12 cu ft (100 km3) in the year of 2005. Domestic consumption is expected to go up at about 7% per year for the following decade. The Iranian government has also subsidized natural gas prices along with gasoline prices, and this is expected to sustain this high level of domestic consumption. In lieu of this increasing domestic demand, natural gas exports are expected to decrease in the following years.[26]

Energy consumption in Iran is 6.5 times that of global average.[28] It is estimated that 18.5% of electricity generated in Iran is wasted before it reaches consumers due to technical problems. Electric power wastage hit $1.1 billion in 2006.[29]

Iran’s domestic consumption and production have steadily grown together since 1984 and it is still heavily reliant on traditional thermal energy sources of electricity, with a small fraction being produced by hydroelectric plants.[31] Consumption has steadily risen and it is expected to rise at about 6 percent per year for the following decade. Accordingly, the Iranian energy sector must focus its efforts on meeting this continuing demand. Today Iran ranks 19th largest producer and 20th largest consumer of electricity in the world.[32] A research by the Ministry of Energy indicated that between 15,000-20,000 megawatts of capacity should be added in Iran in the next 20 years.[33] In recent years Iran has put greater emphasis on participation of domestic and foreign investors in electricity generation sector, with projects underway to add 40,000 MWh more capacity to the national grid.[34]

It is estimated that some 18.5 percent of electricity generated in Iran are wasted before it reaches consumers due to technical problems.[35] Iran is among the top ten manufacturers of gas turbines with a capacity of 160 megawatts.[36] Iranian experts of JEMCO (a subsidiary of IDRO) have succeeded in developing the capacity to produce one-megawatt generators.[37] Iran has acquired self-sufficiency of over 80 percent in constructing hydraulic turbines and over 90 percent in producing gas turbines. Within the next few years, Iran can join the list of countries that produce power plant technology (2009).[38] Iran has achieved the technical expertise to set up hydroelectric, gas and combined cycle power plants.[39] Iran is not only self-sufficient in power plant construction but has also concluded a number of contracts on implementing projects in neighboring states.[40][41]

The exploration efforts for sources of power generation are wide and diverse in Iran. Plans are being made to make oil efficient power plants as well as an emphasis on natural gas production in order to meet their growing electricity demand. Nuclear power and hydroelectric power are not focused on for the time being, but they are part of an overall strategy to meet electricity demands. The electricity sector is also heavily subsidized and mostly state owned companies control power distribution, transmission and generation. In order to meet the demands of the electricity sector, however, Iran is beginning to look into private investment.[42]A by-law has been passed allowing the energy ministry to conclude rial or combined rial/foreign-currency contracts for the purchase of electricity from private companies.[21] Private companies in Iran generated 14,440 megawatts of electricity in 2009.[43]

Although some criticize Iran's hydroelectric power plans as potentially dangerous to the environment, most agree that the country's current state of hydroelectric production is much better off than in the past. Iran has displayed a new approach to this sector. After the 1979 Islamic Revolution, the construction of hydroelectric power plants became both a popular private and public venture. Often, construction projects did not meet basic environmental standards, engineering standards, and technical requirements. As a result many of these dams were destroyed or left in dilapidated conditions.[44]

By 2004, the addition of new hydroelectric stations and the streamlining of conventional coal- and oil-fired stations increased installed capacity to 33,000 megawatts (MW). Of that amount, about 75 percent was based on natural gas, 18 percent on oil, and 7 percent on hydroelectric power. However, in 2004 Iran opened its first wind-powered and geothermal plants, and the first solar thermal plant was to come online in 2009. Iran has recoverable coal reserves of nearly 1.9bn short tonnes. The country produces about 1.3m short tonnes of coal annually and consumes about 1.5m short tonnes, making it a small net importer of coal.[21]

Demographic trends and intensified industrialization have caused electric power demand to grow by 8 percent per year. The government’s goal of 53,000 megawatts of installed capacity by 2010 is to be reached by bringing on line new gas-fired plants financed by independent power producers, including those with foreign investment backing, and by adding hydroelectric and nuclear power generating capacity. It has also been estimated that Iran has the potential to produce at least 6,150 MWh of electricity by Wave power from its coastline on Persian Gulf alone.[45] Iran is also experimenting with electricity generation from organic wastes and plans to build power plants using sewage and organic waste of domestic and industrial origin as fuel.[46] Another area in which there is ongoing research is assessment of Iran's tidal power potential.[47][48] With about 300 clear sunny days a year and an average of 2,200 kilowatt-hour solar radiation per square meter, Iran has a great potential to tap solar energy.[49]

As a further drive toward diversification of energy sources, Iran has established wind farms in several areas, this one near Manjeel.

In 2010, the Iranian government announced plans to build 2,000MW of renewable energy capacity between 2010-2015. As of 2010, Iran had 8,500MW of hydroelectric capacity and 130MW of wind energy capacity. As at 2010, private companies had signed contracts to build more than 600MW of biomass systems and 500MW of new wind energy projects.[54]

Iran is also working to make renewable energy commercially viable and the Ministry of Energy is required to buy privately produced renewable energy at world market prices. A feed-in-tariff (FiT) for wind and biomass energy around 13 cents/kWh is helpful.[54]

Iran's unique geographical position means 90% of the country has enough sun to generate solar power 300 days a year. According to PressTV Iran has 520 watts per hour per square meter of solar radiation every day.[55] Other sources give an average of 2,200 kilowatt-hour solar radiation per square meter.[56] Energy generated by solar power reached 53 MW in 2005 and 67 MW in 2011.[55]

Iran has the potential to generate 20 to 30 GW of wind energy. That is half of the total energy consumption needs of the country. As at 2012 Iran had 163 wind turbines with an installed capacity of 92470 kWh.[55]

Iran's projected oil and gas revenues chart by the International Monetary Fund. Officials in Iran estimate that Iran's annual oil and gas revenues could reach $250 billion by 2015 once the current projects come on stream.[61]